Archive for the ‘Sourcing Strategy’ Category

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Retail spend management basics.

Monday, April 12th, 2021

 

Todays post is by Ron Southard, CEO at SafeSourcing Inc.

No you do not!

A major step to trying to understand where to spend your effort when building an e-RFX attack plan is to understand the detail of your company’s P&L and how it can provide clues as to where you might have the most impact.

I meet with buyers or other e-procurement knowledge workers on a regular basis that want to know what categories are the best to select in the short term to prove the benefit of  e-negotiation tools. This quite honestly is not a bad approach for pilot selection as it creates an almost sure thing that results in a lot of excitement and the energy to move the process forward within a company.

Quite often before meeting with a new client, I will analyze their annual report and their summary and detailed P&L if available in order to get a good idea as to where the opportunities are hiding that can have an immediate impact. However in order to have long term viability as a way to conduct the business of buying, a more detailed analysis is required. Quite frankly before you can even begin to discuss vendor or supplier selection, management or evaluation this process is critical.

Key data required to prepare you for this analysis can consist of but is certainly not limited to the following. All of this data is readily available from a variety of industry sources. Quite often the data is a year old but you can bet it is better than anything else your customer may be using today.

1. Research and accumulate your specific Industry data
2. Analyze last years P&L
3. Compare your cost of goods with your Industries averages
4. Compare your gross margins with your Industry averages
5. Compare your net earnings with your industry averages
6. Conduct the same comparisons with selected retailers with whom you compete. Pretty easy if they are public.
7. Compare your departmental sales and margin results to those of your specific industry.
8. Look for department level anomalies.
9. Look for specific product anomalies within major and sub departments.
10.Select top categories that are below plan and outside industry average for cost of goods and margin.
11.Select top products that are underperforming to industry averages and plan

One example of the above might be to look at the grocery department sub category of pet care. Now drill down to the sub category of cat and dog products and a list of all accessories. Now look at what products are underperforming to the industry and plan. Continue your analysis with other underperforming categories.

In summary, did you need a spend cube to try and figure this out? No you did not. You needed someone that understands your industry and your P&L with some analytical common sense.

If you’d like to learn how these techniques can assist you, please contact a SafeSourcing customer services account manager.

As always, we look forward to and appreciate your comments.

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The Nine Deadly E-Procurement Objections!

Tuesday, April 6th, 2021

 

 

Todays post is by Ron Southard CEO at SafeSourcing

This is a repost from a couple of years back because I just came out f a discovery session with a roomful of buyers and heard at least 5 of these. Fortunately the company CFO who was in attendance asked the following “If this is so, why does Ron have so many examples of products and services we buy every day at lower costs than we pay”. 

The following are the objections we hear all of the time after we have presented to a prospect that has not been exposed to e-procurement tools in the past.

1. We already get the best cost.
2. We’ve done business with this supplier for years.
3. We don’t have product specifications.
4. We don’t have time for this.
5. Switching costs will be too high.
6. We can’t insure the same quality.
7. We need to adhere to certain standards.
8. We are aware of all of the sources of supply in this area.
9. Our business is different!

Often the real reason for these objections is a lack of understanding as to the services being provided which actually extend the productivity of financial and procurement knowledge workers. An underlying reason is that these same knowledge workers believe they are already doing a good to great job. They believe they understand the detail of the category, the supplier community and the leverage point for driving quality results.

So what does it mean to your procurement knowledge workers when based on the above the very first e-procurement event you run returns dramatic savings from your incumbent as well as several other suppliers you were not aware of? Does it mean your team is not doing their job? Does it reflect poorly on them as individuals and or a team?

This author does not believe so, what it simply means is that they are not aware of how much more they can accomplish, how much further they can extend their reach and how much more time they will have to evaluate data instead of collecting and assembling it based on the use of modern strategic sourcing tools that extend their knowledge base.

If you would like to learn more about how your team can accomplish more in a shorter period of time, please contact SafeSourcing.

We look forward to and appreciate your comments.

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Why should retailers be concerned with evergreen contracts?

Friday, April 2nd, 2021

 

Todays post is a rework by Ron Southard, CEO at SafeSourcing Inc.

This author has been asked on numerous occasions why I am so concerned with evergreen contracts. First, let’s discuss what an evergreen contract is. A simple definition is that it is a contract or an agreement between two parties (you and your supplier) that is automatically renewed or rolled over after each completion period which is typically a year, until canceled by the either party.

This does not sound so bad at first glance, particularly if the current terms of the contract such as price, performance, quality, service or service level are all being met and are to your advantage when they automatically renew. However this is not normally the case, particularly with contracts that are driven by commodity markets such as oil, chemicals, resins, pulp, steel and many others. In addition you can bet if the advantage is in your favor in the initial contract that your current supplier will notify you in writing within the specified period which is usually 60 days that they are going to let the contract expire or want to renegotiate.

In large parts of the retail trade, there are very few sophisticated contract management solutions deployed, the cost to the industry annually runs in the billions of dollars. This is because the original contract normally has language that includes price increases above the current contract when it auto renews and the auto renewal is normally for a year if the supplier is not notified in writing prior to the anniversary date. Once renewed you are stuck. This happens because most buyers or executives think they will remember in time to notify your supplier when in fact this almost never is the case. As most retail companies have thousands of contracts in the place the amount of data requiring review is unmanageable.

The worst case I ever reviewed was a contract written nine years earlier that had renewed every year. The customer was actually paying the uplifted prices and substantially more than a much smaller company was paying for the same type of service at significantly lower volumes. This did not even include newer technology benefits.

Contract management solutions that offer alert subsystems based on contracts Meta data are the best solution to this problem and typically provide near immediate ROI based solely on the cost avoidance associated with evergreen contracts.

SafeSourcing offers an easy to use solution called SafeContract™ to help our customers with this problem. Ask your solution provider how they can help you. Or contact SafeSourcing.

 

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Freight Tendering 101

Wednesday, March 31st, 2021

 

Todays post is from Ron Southard, CEO at SafeSourcing Inc.

This author has been in and around the freight business for years. Actually for 40 years. Just like the unrelated movie, I have seen it all. Planes, trains and automobiles (trucks really) to be sure but also ocean bound freight. The ships and planes get bigger, but at the end of the day the same issue exists. How do companies get their products to where they need to be efficiently and at a cost that is acceptable in order to satisfy customer demand?

This is not necessarily about your internal optimization models; it is more about the data that feeds your internal optimization models. That is of course if you even have one. The basis for collecting that information is not all of the math calculations and pivot tables; it really is the following types of data.

• Lane data in distance for your delivery model such as Plant to DC.
• Volume discount data from carriers
• Lane rate per mile
• Fuel Surcharge rate
• Human resources rates for loading and unloading (Lumpers in the US)
• 3PL storage rates
• Load balancing charges for LTL versus FL

There may be other data that is required for your individual model, but the above will cover most of what you need to come up with a well rounded format that freight companies can easily bid on.

Relative to who should be bidding; this authors recommendation conducting a three step process that includes a detailed RFI, followed by a detailed RFP and then ultimately the RFQ data compression piece or a reverse auction.

• RFI  – Incumbent and other participants selected from a quality sourcing  database
• RFP – Participants include a reduced number from the RFI process
• RFQ – Includes all RFP participants unless otherwise indicated by the host.

The terms and conditions of the reverse auction or RFQ can cover the balance of information needed by providers that relates to quality, certifications, payment terms, safety, insurance etc.

If you want to get control of your freight costs, please contact a SafeSourcing customer services representative.

We look forward to and appreciate your comments.

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Sourcing Music

Thursday, March 25th, 2021

 

Today’s post is from our  SafeSourcing Archives

There isn’t an organization on earth that doesn’t use music for its business in some capacity. Offices without any background music are awkward, phone lines without hold music makes customers think no one is actually holding for them, and video marketing is incomplete without song. Even though you may feel that the latest hit would be a perfect fit for your multimedia needs, without following the right procedures you could be on the hook for damages much larger than the actual licensing fees. But where do you start?

The rights to any musical composition’s distribution are typically managed by the publishing company under what are known as “mechanical licenses”. Sometimes the rights can be released directly by the copyright holder, but typically only under special circumstances such as when the request comes from a source with strong cross-promotional influence, or a friend of the artist themselves. The major Performing Rights Organizations (PROs) are ASCAP, BMI and SESAC. All commercial artists will be affiliated with one or the other organization. However, obtaining a license to use the music of one organization does not give you legal access to the libraries of all three PROs. There are, however, several third party companies who have licensing agreements with the PROs, and will grant access to specific works within their libraries for a fee. If you need to be able to customize how you use the creative work, such as by editing a song to fit within a TV commercial or radio jingle, obtaining licensing through a third party is usually the easiest way to go. However, if all you need is elevator music, obtaining licenses specific to your organization is probably unnecessary.

Typically, the best route for a company to take is to purchase systems with pre-existing music libraries already integrated. For example, many VOIP providers either have their own content created exclusively for their organization, or have purchased rights to creative works themselves. This places the burden of working through the licensing issues on the service provider you are using. However, if you want to make sure your service provider is compliant, you should ask for documentation proving compliance with current copyright laws identifying the corresponding PRO.

Please leave a comment or for more information on how SafeSourcing can assist your team with your procurement process or on our “Risk Free” trial program, please contact a SafeSourcing Customer Service Representative. We have an entire customer services team waiting to assist you today.

 

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Retailers, Are You Considering Installing Self-Checkout Lanes?

Monday, March 22nd, 2021

 

Today’s post is by Troy Lowe; Vice President of Development at SafeSourcing.

I remember when grocery stores started adding self-checkout lanes in their stores.  It seemed odd that you would go through a line and have to scan and bag your own groceries when there are employees there to do that for you.  At first I thought why would I pay the same price for my groceries and do all the work myself.  But as time went on, I came to find these lanes to be very convenient especially when only purchasing a few items.  Now with the pandemic a lot more places are looking to add this same convenience to their stores as well.  For example, I was at Costco the other day and they now have kiosks set up at their food-courts so that you can order and pay for your food.  When they began testing these, their original purpose was reducing and eliminating long food court lines.  But because of the pandemic they ramped up the release of the kiosks to avoid crowding and human interaction.  This is no surprise given that recent surveys have shown that over 80 percent of shoppers prefer to shop in stores that offer touchless or self-checkout options.

If you are interested in adding self-checkout to your stores below are some advantages for adding them.

  • Improve customer experience
  • Less employee support
  • Faster and more efficient
  • Can increase store space
  • Shorter Queue’s
  • Frees up time for employees
  • Reduced HR costs

Today’s solutions are varied, If you need help finding your self-checkout solutions for your company, feel free to contact SafeSourcing, you won’t pay as much.   We can gather all the necessary information for you and help you decide which company meets your needs.    If you would like more information on how SafeSourcing can help you, can help you,  please contact a SafeSourcing Customer Service representative.  We have an entire team ready to assist you today.

 

 

 

 

 

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Getting Savings Through the Learning Curve

Thursday, March 18th, 2021

 

 Today’s post is by Dave Wenig, Senior Vice President of Sales and Services at  SafeSourcing.

Learning is a topic that has no shortage of sayings and idioms, and common phrases that refer to it. To name a few…

  1. “You learn something new every day”
  2. You can “learn the hard way”
  3. You can “learn from your mistakes”
  4. And, of course, you may experience a “learning curve”

The list could go on, but the point is that learning is a fact of life. In eProcurement, you will likely find plenty of opportunity to learn, but there are a few things that you can do as you get started to make sure you learn quickly and that you’re able to enjoy the benefits of your eProcurement process even as you’re learning. Here are a few thoughts on the matter so that you can learn from the experience of others.

The first one  I’ll share is that it is absolutely possible to learn as you go with eProcurement. In fact, the best way to learn how the process works and what works best for you is to select some categories to start with and to begin sourcing. With SafeSourcing, we help our customers get off and running very easily because of our full-service SaaS model. That eliminates many of the typical barriers to entry that would prevent a new user from experiencing how eProcurement works and from getting the immediate value created when we reduce costs in those early categories.

Secondarily, I would note that you don’t need to learn anything the hard way. For customers willing to embrace eProcurement and are willing to be open minded in their learning, SafeSourcing can offer much guidance. From experience, the more closely you are willing to work with us and communicate regularly, the better your learning experience will be. We’d rather help you learn from the mistakes of other than your own and we’re going to guide you around the types of challenges and pitfalls that exist.

Like any subject, learning in eProcurement is an entirely subjective experience. From our perspective as the eProcurement provider, we can make learning a very easy process, but everyone learns their own way. No matter your learning style, just know that we’re here to make sure that you succeed.

If  you would like more information on how SafeSourcing can help you, please contact a SafeSourcing Customer Service representative.  We have an entire team ready to assist you today.

 

 

 

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Poultry Trading Enters the Digital Age

Wednesday, March 17th, 2021

 

Today’s blog is by Gayl Southard, Vice President Administration for SafeSourcing.

For companies, such as Tyson Foods Inc., moving product from farmers to vendors worldwide still requires phone calls, spreadsheets and vendor relationships with middlemen that take a cut of the profits.  The broker fees add up and getting up-to-the-minute pricing information isn’t always reliable.  Inventory and supply are not on a centralized database.

Scott Spradley, Chief Technology Officer at Tyson, the second largest processor of chicken, beef, and pork in the U.S. indicated some of their partners still rely on fax machines.  To fill a supermarket order for chicken, salespeople need to call the warehouses across the country.  Improving technology could dramatically improve company profitability.  Tyson is employing technology with robotic arms to package poultry and digital equipment for sales teams to identify consumption trends.  Spradley said a couple of years ago while he was preparing for a board meeting he was thinking about all of the components that made up his breakfast sandwich and all the stops those separate ingredients had to make before it reached the consumer.  Thousands of miles are involved in bringing ingredients together, as well as packaging, for one breakfast sandwich.  By reducing mileage using technology costs will come down.

For more information on how SafeSourcing can help your procurement efforts, or on our Risk Free trial program, please contact a SafeSourcing Customer Service Representative.  We have an entire team ready to assist you.

References………………………………………………….

Julia-Ambra Verlaine, WSJ, 3/9/2021

 

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How should companies determine value? Part III of III.

Tuesday, March 16th, 2021

 

Yesterday I asked you to check back today for Part III of this post to learn why our customers and associates are passionate about SafeSourcing

Today’s post is by Ron Southard founder and CEO of SafeSourcing.

I originally published this  three part series seven years ago. In todays environment it is as important as ever. Please Enjoy

We launched our company SafeSourcing over  12 years ago. Our goal during that time was to bring passion and commitment to the procure to pay process. I was in a meeting with a customer a few weeks back and asked if they would be adding additional staff to support the work we do together. The answer was not directly to the procurement team, but because of the work we do together; other departments will be able to benefit by maintaining headcount that might not have otherwise. This may not be job creation, but it certainly is job preservation. The customer I was speaking to has also added a number of associates both temporary and full time to support the work we do together over the last several years and we have added several associates to support this customer alone. So, we have created jobs for our customer, preserved jobs for our customer, created jobs for our company and saved our customer millions of dollars at the same time. I can’t think of a better value equation and if that’s not meaningful work I’m not sure what is.

Procurement in general may not be the profession of choice for many, however it is a place that associates can be passionate about if the trickle down is explained and reinforced properly. In today’s world, who would not be passionate about helping to create or retain jobs, improve product and food safety and support a better environmental footprint?

There may even be more than a few folks running for public office at the highest level today that could be significantly more successful with their approach if they could prove that their desire is to do the same, albeit in a much larger footprint. It’s easy to be passionate yourself; it’s much more difficult to ignite that same passion in others. When you do, then you have real value.

If you would like to work with a team that is passionate about procurement to help your team find their passion, please contact a SafeSourcing customer services representative or ask us for an executive reference. You won’t be sorry that you did.

 

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How should companies determine todays true value? Part II of III.

Monday, March 15th, 2021

 

I heard  a young worker say the other day that new hires did meaningless work and needed to be prepared for that when the started a new job.

Today’s post is by Ron Southard founder and CEO of SafeSourcing.

I originally published this  three part series seven years ago. In todays environment it is as important as ever. Please Enjoy

This totally freaked me out as a business owner who constantly strives to point out the value of what we do, as well as the value we create relative to job growth internally and externally. Certainly one can measure value in terms of customer savings, Return on investment, capital etc. One can also create value through quality improvement of both services and products sourced beyond what is being sourced today. Value can be measured in process improvement internally and externally that might add to a company’s profit or help in retaining jobs. There is a measureable trickle down effect of doing meaningful work; it is something you can be passionate about if you truly are trying to be a better corporate and global citizen. Are there scorecards that measure this? Unfortunately, probably not all of it in one place, but having conversations with your employees/associates relative to their understanding of what your company’s mission is and why it is important is more than just a reason for another meeting that they probably don’t want to attend in the first place.

Personally, I believe that people want to be perceived as valuable by anyone and everyone that they meet whether in their personal life or their professional life. As leaders, we should be in the job of creating excitement about what we do. We may in fact have associates that started out wanting to be a doctor, lawyer, professional athlete or some other profession as many of us did. Today at our company, they work in procurement. Left to their own devices they may feel as though they have not or can not accomplish the success they dreamed about in their youth. Whose job is it to stop that thinking in its tracks and promote an environment of excitement and passion? The answer is that leadership starts at the top. If our leaders are not passionate and regularly reinforcing the work of their company, how do you expect your associates to be passionate. After all, who wants to just go to work and do meaningless stuff?

Check back for Part III of this post on Tuesday March 16th  to learn why our customers and associates are passionate about SafeSourcing.

In the meantime if you would like to work with a team that is passionate about procurement to help your team find their passion, please contact a SafeSourcing customer services representative or ask us for an executive reference. You won’t be sorry that you did.

We look forward to and appreciate your comments.

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